On Madison Ave., Bowlers and Umbrellas Now Go With Gray Flannel Suits
An upstart British company’s audacious takeover of fourth-ranked J. Walter Thompson ad agency--the largest takeover in advertising history--is just the latest victory in what has become a British invasion of Madison Avenue.
That invasion, which has been spurred by the weaker dollar and is causing uncertainty in the huge U.S. advertising business, has become a matter of pride on this side of the Atlantic.
Martin S. Sorrell, the 42-year-old chief executive of WPP Group PLC, a British marketing services concern, won his battle to take over J. Walter Thompson Co.’s parent JWT Group Inc. on June 26, when JWT’s board agreed to a twice-sweetened offer that reached $566 million, or $55.50 a share.
Sorrell immediately was hailed in the British press, which was captivated by his boldness in acquiring a company about 17 times WPP’s size. JWT had revenue of $641 million last year, compared to WPP’s $38 million.
But some U.S. industry analysts said WPP is paying too much for JWT and that the acquisition will dilute WPP’s earnings and strap the combined company with burdensome debt.
Sorrell, whose secretary said he was traveling between London and New York and therefore unavailable for an interview, hasn’t revealed much about what he plans to do with JWT except to say he won’t sell off its parts.
The first priority for Sorrell will be to reassure the ad agency’s clients, which include Ford Motor, International Business Machines and Goodyear Tire & Rubber.
Ford reportedly is planning to pull a substantial chunk of its advertising account from JWT. All JWT’s clients have said they are reviewing their accounts in light of the takeover.
Colgate Palmolive dropped ad agency Ted Bates Worldwide Inc. after it became part of the British Saatchi & Saatchi Co. advertising agency empire.
JWT contributed to its own demise with its recurring financial and board room crises in recent years, the British press said.
American agency Young & Rubicam Inc. remains No. 1 in terms of 1986 worldwide gross income, but the next three advertising agencies--Saatchi & Saatchi, Saatchi & Saatchi-owned Ted Bates and JWT--are or soon will be British owned.
Ogilvy & Mather Worldwide Inc., No. 5, was founded by British-born David Ogilvy.
The British invasion of Madison Avenue started in earnest in 1982, when Saatchi & Saatchi acquired the larger Compton Inc. Sorrell then worked as Saatchi & Saatchi’s finance director and helped engineer the early buying spree.
In addition, the Saatchi brothers have acquired Backer & Spielvogel Inc. and DFS Dorland Worldwide.
Lesser-known British acquirers have been WCRS Group, which bought Della Femina, Travisano & Partners Inc. and HMB-Creamer Inc.; and Boase Massimi Pollitt Advertising, which bought Ammirati & Puris Inc.
Sorrell’s success to date has been attributed partly to a large personal following. Sorrell’s fans include investment bankers at Samuel Montagu & Co. and Credit Suisse First Boston Ltd., which are helping him finance his bid. In addition, investors, who have bought and profited from WPP’s stock in the past, likely will snap up the new stock WPP is issuing to pay, in part, for the JWT takeover.
The diminutive Sorrell has a reputation as an entrepreneur with extraordinary financial savvy, a health enthusiast and a workaholic.
The only son of a London retailer, Sorrell attended Cambridge University and Harvard Business School. He then went to work for Mark McCormack, the U.S. sports promoter, and James Gulliver, the acquisitive head of British retailer Argyll Group PLC.
After that, he worked for the Saatchi brothers, where he stayed for eight years.
Sorrell became chief executive of what was formerly called Wire & Plastic Products PLC in 1985, when it was a little-known maker of supermarket carts. He transformed it into a company specializing in promotional services through 11 acquisitions in the United Kingdom and four in the United States in less than two years.
While Sorrell concentrated on building up “below-the-line” services such as design and sales promotion, he looked for a good opportunity to get into mainstream advertising.
He has found that opportunity, but it won’t be a simple thing to succeed on dog-eat-dog Madison Avenue.
